Financial Consumer Protection
in China
SUN Tianqi
The People’s Bank of China
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Sun Tianqi PBOC
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Contents
1. Financial Consumer Protection (FCP) Framework
in China
2. Four Regulators’ （PBOC, CBRC, CSRC, CIRC ）
Efforts
3. Problems and Challenges
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1. FCP Framework in China
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1. FCP Framework in China
As to FCP, there are 6 defense lines in China:
① Consumers
② Financial institutions
③ Financial industrial associations & China Consumers’
Association (CCA)
④ Regulators-PBOC, CBRC, CSRC, CIRC & related government
departments
⑤ Judiciary/Arbitration
⑥ Mass media, social monitor.
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1. FCP Framework in China
1.1 Consumers
 The first and the most important defense line.
 Learning financial knowledge actively, not passively.
 Self-assessment about risk-taking capacity
 Take the consequences of the risk
One proverb of Chinese:
 “Relying on mountain, the mountain may be collapse”
 “Relying on important people, the people maybe collapse too”
 “Relying on yourself is the most reliable way”
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1. FCP Framework in China
1.2 Financial institutions
Financial institutions increasingly pay more attention to
FCP & FE.
 Internal control system
 Product design
 Services quality improvement
 Complaints handling system
 Financial education
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1. FCP Framework in China
1.3 Financial industrial associations and China
Consumers’ Association (CCA)
China Banking Association(CBA), Securities Association of
China(SAC) and Insurance Association of China(IAC)
show growing influence on financial consumer protection
work.
 Self-regulation
 Set industry conduct rules
 Urge members to fulfill declared responsibilities
 Financial education
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1. FCP Framework in China
1.3 Financial industrial associations and CCA
CCA is an important channel of hearing and resolving all sorts of
consumers complaints (including financial cases).
 Provide information and consultation to financial consumers
 Take and address financial disputes
 Help consumers with judicial/arbitration advice
 Cooperate with regulators and industrial associations
 Cooperate with press media
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1. FCP Framework in China
1.4 Regulators-PBOC, CBRC, CSRC, CIRC &
related government departments
Approved by the centre government, 4 regulators had set
up 4 financial consumer protection bureaus from 2011.
I.
II.
III.
IV.
The Banking Consumers Protection Bureau of CBRC
The Investors Protection Bureau of CSRC
The Insurance Consumer Protection Bureau of CIRC
The Financial Consumer Protection Bureau of PBOC
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1. FCP Framework in China
1.4 Regulators-PBOC, CBRC, CSRC, CIRC & related
government departments
The 3 main responsibilities of Financial Consumer Protection
Bureau of PBOC are:
 Conduct research on main issues of the whole financial industry;
collaborate with related authorities to make policies, regulations and
laws for the whole financial industry.
 Work with other departments to set cross-sector rules for FCP
PBOC focus on the whole financial industry
 Carry out FCP work within PBOC’s mandate by law
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More information :
① Financial Consumer Protection Bureau of PBOC is in the
country-level.
② There are 31 FCP departments in the 31 PBOC’s provincial-level branches.
③ PBOC’s city-level branches and county--level branches are
responsible for the FCP in their region.
④ In city-level, there are no branches of CSRC and CIRC.
In county-level, there are only branches of PBOC.
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1. FCP Framework in China
1.4 Regulators-PBOC, CBRC, CSRC, CIRC &
related government departments (cont’d)
The main responsibilities of Banking Consumers Protection
Bureau of CBRC :
 Set the general plan, regulations and detailed policies of
banking consumer protection
 Investigate and deal with bank consumers’ complaints
 Practice public education of banking consumer
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1. FCP Framework in China
1.4 Regulators-PBOC, CBRC, CSRC, CIRC &
related government departments (cont’d)
The Investors Protection Bureau of CSRC is responsible for :
 Formulate policies on securities investors protection
 Promote investors education and services; press
markets players to inform the risks to investors
 Handles and coordinates to address complaints
 Assists investors to compensate for their violated rights
 Supervises the running of investors fund
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1. FCP Framework in China
1.4 Regulators-PBOC, CBRC, CSRC, CIRC &
related government departments (cont’d)
Duties of Insurance Consumer Protection Bureau of CIRC are:
 Formulate policies in the area
 Investigates and resolves disputes
 Carry out system building of consumers education and
services, and guides to enhance credibility
 Supervises engaged agencies and staff on disclosure of
risks and information
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1. FCP Framework in China
1.4 Regulators-PBOC, CBRC, CSRC, CIRC &
related government departments (cont’d)
These 4 consumer protection bureaus of the 4 regulators
further collaborated on the basis of fulfilling their duties
respectively.
 December 2012, PBOC and CSRC jointly released ‘Memo of
Improving Supervisory Collaboration on Securities and Futures to
Maintain Financial Stability ’
 PBOC cooperated with CSRC on FCP pilot
 Financial Consumer Protection Bureau of PBOC will seek effective
approaches of coordinating system with the other three counterparties
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1. FCP Framework in China
1.4 Regulators-PBOC, CBRC, CSRC, CIRC &
related government departments (cont’d)
All levels of government have their departments to resolve
complaints for general consumers (Financial consumers are
included).
 Industrial and commercial administration
 ‘12345’-mayor’s hotline
 Office for Correcting bad/Illegitimate Practices of all
Trades
 Financial services office of local government.
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1. FCP Framework in China
1.5 Judiciary and arbitration are the final
defense and resort.
 Consumers could seek settlement via judicial or
arbitral means.
 Both arbitral and judiciary decisions are legally
binding.
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1. FCP Framework in China
1.6 Mass media
Mass media plays an important role in FCP & FE.
 Bring pressure on misconduct agencies through
public voice
Somehow a few local minor newspaper speculate and
overstate disputes
 Help boosting financial consumer education and this
could lower the regulators’ cost
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2. Four Regulators’ Efforts
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2. Four Regulators’ Efforts
2.1 PBOC’s efforts
2.1.1 Rule writing
 Took part in amending China’s Consumer Protection
Law, and expounded and proved the addition of
financial consumer protection part.
 Pushed forward the launching of China’s Anti-money
laundering Law, Regulation on the Administration
of Credit Reporting Industry etc.
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2. Four Regulators’ Efforts
2.1.1 Rule writing (cont’d)
 PBOC released Guideline on Personal financial
information protection.
 Put forward specific measures in certain areas, and
correct the wrong behavior of agencies in time.
Bank card
Account management
Payment services by non-financial institutions
Foreign exchange administration
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2. Four Regulators’ Efforts
2.1.2 Build the supervisory mechanism
 Several PBOC’s branches completed the Financial
Consumer Protection Regulatory Handbook.
 The Bureau conducted on-site examination of
personal financial information protection and other
essential areas together with other functional
departments of PBOC.
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2. Four Regulators’ Efforts
2.1.3 Complaints taking and addressing
 Selected 5 pilot provinces/city (Shanghai, Hubei, Guangdong,
Jiangsu & Shaanxi) to try 12363 financial complaints hotline, and
will expand allover the country.
 For those disputes that can’t be resolved between financial
institutions and consumers, PBOC and its branches would step in
and mediate.
PBOC handled 6899 disputes in 2012, and the satisfactory rate
reached 98%.
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2.1.3 Complaints taking and addressing (cont’d)
 PBOC keeps consumers informed that its mediation is not the
last resort (unbinding). They can turn to judicial or arbitral court
for final results.
 In order to make the mediation result “binding”, several
PBOC’s branches try to get judicial court’s confirmation on
the result.
 PBOC is studying how to set up ADR mechanism.
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PBOC Xi’an branch (Shaanxi Province) requires all
commercial banks to disclose its own internal complaints
number and the PBOC’s 12363 hotline number at each outlet.
 Complaints decreased.
 Financial service quality improved
 The efficiency and effectiveness of financial institution to address
disputes on-site increased
 The whole Shaanxi Province: 39m population, PBOC only takes 5
complaints and 10 inquires per day.
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PBOC Wuhan branch requires all commercial banks to disclose 12363 hotline
number at each outlet.
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2. Four Regulators’ Efforts
2.1.4 Financial consumer education
 Supported by the other 3 regulators, PBOC drafted
National Strategy of Financial Education of China to
OECD.
 Conducted questionnaire on financial literacy of
consumers, and worked on the indicators system to
evaluates the effectiveness of financial education.
 Compiling the Financial Knowledge Readings
targeting the public, and built online consulting and
education platform for financial consumer.
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2. Four Regulators’ Efforts
2.1.4 Financial consumer education (cont’d)
 Promote counter-fake money campaign through publishing
pamphlets and RMB counter-fake web site.
 Organized campaigns: ‘6.14 Credit Record Day’, ‘Credit Knowledge
Week’ etc.
 Other activities: ‘Anti-Money Laundering Month’, ‘Anti-Money
Laundering Contest’ etc.
 Organized ‘Financial Knowledge going into Community’ campaign,
payment science training, and propaganda of safe use of bank card
targeting rural residents.
 Cooperate with local governments and other regulators to carry out
‘3.15 Financial Consumer Protection Campaign’.
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2. Four Regulators’ Efforts
2.2 CBRC’s efforts
 Enhances prudential supervisory system, protects the rights of
depositors and other clients, and keeps the public confident about
banking industry.
 Improves peoples’ understanding of modern financial products and
services and their ability to identify corresponding risks via
propaganda and disclosure.
 Conducts special examination, and strikes and prevents financial
crimes.
 Conducts on-site investigation at bank outlets and handles the
problems such as ‘unfair attached clause’, ‘overcharge’ etc.
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2. Four Regulators’ Efforts
2.3 CSRC’s efforts
 Refines legal framework by pushing forward the amending of
Securities Act and Law of the People’s Republic of China on
Securities Investment Fund.
 Conducted special inspection, and strengthened the punishment of
misbehavior.
 Advance the pilot work of protection and litigation of specialized
institutions as shareholders, and improve marketized investor
protection mechanism.
 Build and improve multi-resolution mechanism of securities and
futures disputes, and launch the nationwide unified 12386 investor
hotline.
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2. Four Regulators’ Efforts
2.4 CIRC’s efforts
 Construct generally participated insurance consumer protection
framework.
 Improve insurance complaints handling mechanism, and
increase the compensation of salvage insurance. 12378
national insurance complaints hotline has been launched.
 Strengthen public education and risk warning to reinforce
precautionary insurance.
 Conducted special examinations and sorted out pending or
unsolved property insurance contracts. The settlement rate
reached 63% to an amount of 30 billion RMB.
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3. Problems and Challenges
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3. Problems and Challenges
3.1 Time-consuming legislative process
 Regulations concerning financial consumer protection can be partly
found in Commercial Banking Law and Anti-Money Laundering
Law etc, but are considered too general and lacks of definition of
‘financial consumer’ . This situation calls for specialized Law of the
Peoples’ Republic of China on Financial Consumer protection,
however it may takes a really long time.
 Lack of legislation on financial consumer privacy. There’s need to
formulate Regulation on Personal Privacy to define the range of
protection, infringement, compensation procedure etc. The process
requires communication and coordination among a number of
authorities and is also time-consuming.
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3. Problems and Challenges
3.2 Overlap & Blind Zone
The four regulators, CCA and associations are all authorized to take and settle
financial disputes and initiate financial education activities.
 The overlap of supervision causes extra compliance burden to financial
institutions.
 Existing supervision gaps (blind zone) bring potential risks.
 Conflicts between prudential and behavioral supervision
 As to FCP, how to ensure the fairness and justice of industry associations
given the fact that their funding and staff all come from the industry.
So,
 Regulators need to coordinate to avoid Overlap of supervision or supervision
gaps.
 Internal related departments within a regulatory authority need to collaborate
as well.
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3. Problems and Challenges
3.3 Adverse Selection and Moral Hazard
 Protection of financial consumer should be appropriate
and limited, not 100%.
 Overprotection may lead to adverse selection.
e.g. to hide background information in order to purchase
high-risk products.
 Overprotection may also brings moral hazard.
e.g. passive post-transaction monitoring, meaning not in
time trying to fix the possible loss.
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3. Problems and Challenges
3.4 Big difference and gap among consumers
 City residents VS rural residents
 East China (developed) VS west China (Undeveloped)
 Different consumer groups of city residents
 Consumers from minority nations
 Financial inclusion needs enhancement. At the end of
2012, there still remains 1686 towns (belong to counties)
that do not have financial services.
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3. Problems and Challenges
3.5 Expertise of regulators need to be improved
 Experience and expertise about legal and accounting
knowledge plus on-site examination
 Address disputes related to ‘new & high-tech’
Credit card cloning
Crime
 The government is not cleverer than the market / private sector.
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3. Problems and Challenges
3.6 Is it necessary to include the financial consumer
protection into FSAP assessing system??
FSAP is generally adopted to evaluate each country’s financial stability. Is it
necessary to:
 Include FCP into FSAP qualitative indicators?
 Include FCP into FSAP quantitative indicators??
 Set the weight of FCP in FSAP quantitative indicators??
Maybe, It can help the international FCP rules change from ‘soft
rule’ to ‘hard rule’, change from “unbinding” to “binding”.
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Thank you!
Email: stqds@126.com
Tel:86-10-66199530
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